Correlation Between Snap and Prudential Emerging
Can any of the company-specific risk be diversified away by investing in both Snap and Prudential Emerging at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Snap and Prudential Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and Prudential Emerging Markets, you can compare the effects of market volatilities on Snap and Prudential Emerging and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Snap with a short position of Prudential Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and Prudential Emerging.
Diversification Opportunities for Snap and Prudential Emerging
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Snap and Prudential is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and Prudential Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Emerging and Snap is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Snap Inc are associated (or correlated) with Prudential Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Emerging has no effect on the direction of Snap i.e., Snap and Prudential Emerging go up and down completely randomly.
Pair Corralation between Snap and Prudential Emerging
Given the investment horizon of 90 days Snap Inc is expected to under-perform the Prudential Emerging. In addition to that, Snap is 11.02 times more volatile than Prudential Emerging Markets. It trades about -0.01 of its total potential returns per unit of risk. Prudential Emerging Markets is currently generating about -0.03 per unit of volatility. If you would invest 464.00 in Prudential Emerging Markets on August 25, 2024 and sell it today you would lose (13.00) from holding Prudential Emerging Markets or give up 2.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Snap Inc vs. Prudential Emerging Markets
Performance |
| Timeline |
| Snap Inc |
| Prudential Emerging |
Snap and Prudential Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and Prudential Emerging
The main advantage of trading using opposite Snap and Prudential Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap position performs unexpectedly, Prudential Emerging can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Prudential Emerging will offset losses from the drop in Prudential Emerging's long position.The idea behind Snap Inc and Prudential Emerging Markets pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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